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Poisoning the Next Apple? The America Invents Act and Individual Inventors

The Leahy-Smith America Invents Act, the most significant patent law reform effort in two generations, has a dark side: It seems likely to decrease the patenting behavior of small inventors, a category which occupies special significance in American innovation history. In this paper we empirically predict the effects of the major change in the law: a shift in the patent priority rules from the United States’ traditional “first-to-invent” system to the predominant “first-to-file” system. While there has been some theoretical work on this topic, we use the Canadian experience with a similar change as a natural experiment to shed the first empirical light on the question.

Our analysis uses a difference-in-difference framework to estimate the impact of the Canadian law change on small inventors. Using data on all patents granted by the Canadian Intellectual Property Office and the US Patent and Trademark Office, we find a significant drop in the fraction of patents granted to small inventors in Canada coincident with the implementation of first-to-file. We also find no measurable changes in patent quality and perform several additional analyses to rule out alternative explanations. While the net welfare impact that can be expected from a shift to first-to-file is unclear, our results do reveal that, contrary to the conventional wisdom, the March 2013 implementation of a first-to-file rule in the U.S. is likely to result in reduced patenting behavior by individual inventors.